Cryptocurrencies have broken into mainstream financial consciousness in a big way and have dominated global headlines as their value has soared. Bitcoin has been a big driver of Cryptocurrency adoption, its value having surged 40,000% since its launch. Other Cryptocurrencies like Litecoin, Bitcoin Cash and Ripple have since launched, increasing the investment opportunities.

As the price of buying Cryptocurrencies has risen so quickly, smart investors have sought different ways to profit from Cryptocurrency volatility. One of the best ways to profit from Cryptocurrency price movement is to trade Cryptocurrencies rather than owning the underlying asset and there are a number of benefits to doing so.

The benefits of trading Cryptocurrencies over buying them

The intense growth of Cryptocurrencies and their higher than normal volatility means that there are plenty of opportunities for traders, as well as potential risks. The biggest difference between buying versus trading Cryptocurrencies is that when you trade Cryptos as a CFD or Spread Bet, you do not own the underlying asset.

This allows you to speculate on the value and price movements of Cryptos like Bitcoin, Litecoin, Ripple, Ethereum and Bitcoin Cash without the need for a digital wallet, offering you a number of benefits over actually owning Cryptocurrencies.

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BY opening a short CFD or Spread Bet position on a Cryptocurrency you can hedge your existing portfolio. This allows you to protect against excess volatility should the price of the Cryptocurrency you own drop dramatically.

By trading, rather than buying individual Cryptocurrencies, you can also benefit from shorter term price moments without having to own any Crypto itself.

You won’t need to register with different exchanges or open multiple digital wallets, so you don’t have to worry about security issues or hacking.

When you trade Cryptos as a CFD or Spread Bet, you can go both long and short to profit from rising and falling prices.

Because you’re trading on leverage you can also gain a larger exposure to the market with a smaller initial investment than would be possible by buying any actual Cryptocurrency.

This helps free up any capital you may have which you can choose to invest in your position.

Remember, while trading on leverage can maximise your profits and give you greater market exposure for less initial capital, it can also potentially increase your risk.

When you trade with City Index we give you the tools you need to help manage your risk responsibly. You also won’t pay Capital Gains Tax or UK Stamp Duty on any profits when you Spread Bet.

It is important to remember that Cryptocurrencies are also very new assets so we don’t yet know how they may perform in a major financial crisis.

In addition, Cryptocurrencies are currently unregulated by any bank, government or central authority and any move towards regulation could impact prices.

Cryptocurrencies are also highly volatile markets so prices can experience dramatic and significant surges.

While this heightened volatility brings opportunity, it also means a greater degree of risk so understanding the market and managing your risk carefully with the use of stops and limits is crucial.

Like with any market, make sure you do your research and understand how and why the price of individual Cryptocurrencies move. Our Cryptocurrency Trading Academy has a wealth of information to help you build your Cryptocurrency trading strategy.

Start trading Bitcoin today with an account at City Index, or test your trading strategies by opening a free demo account to trade risk-free.

For more ideas on trading strategies and how to manage your positions, visit our Cryptocurrency trading hub

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Spread Betting, CFD Trading and Forex Trading are leveraged products. and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

* Spread Betting and CFD Trading are exempt from UK stamp duty. Spread betting is also exempt from UK Capital Gains Tax. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.